Thursday 21st of October

S&P futures made a new multi month high in early trading reaching 1186.25, breaking that 1182.25 high from Monday. However we got no follow through and we reversed lower. I came out on the Twitter when it was trade 1184 yesterday saying:
“not that much expansion in volume on the break above 1185 in ES, so I am not sure the breakout will extend, should have seen more buying imo”
It failed up there basically and also watch George Cavaligos on Failed Auction on Mr Top Step yesterday: http://mrtopstep.com/2010/10/21/george-cavaligos-on-failed-auction/
Talking about the lack of follow through as a weakness sign.

So make sure to follow my twitter handle to get real time information,
twitter handle is: AFtrading

Trading wise I was up 0.59% on the day. Could have been more aggressive on the downside after the failure at 1186, but technically speaking we are bullish above 1163 now, so since that level was not taken out I cannot really go that short I reckon.
I lost 16 points in the ES futures as I had to hedge the short calls even on the way down, but of course made up for the loss on the options side.
I bot back some of the 1170 puts when we tested 1185, for 1.70 to 2.25 points, which turned out well since we moved lower off that level. I always try to close out options with very little value left as any large move can come back and hurt you big time if you leave those positions on. In the options I bot back more 1170 calls for 32.50 to 33 points and sold more 1200 Nov and 1210 Nov 19th calls for 13.50 to 21.25 respectively. Also bot back some 1180 calls for Nov19 paying 24.50.
Positions wise I have now basically move the mass of my short calls higher and they are now more or less above 1190 as compared to around 1170 before. Unless 1207 is broken I will remain to look for a correction lower before we break higher.
Today's candle can be an up trust, which is weakness, making a new high on weak volume to trigger short stops and fool trader’s to buy the break, only to have both people fooled by end of the day. We still need to break below 1163 to really get excited about the downside potential.
We also have POMO tomorrow, which has been supportive for risk on and higher equities.
Pomo schedule:
http://www.newyorkfed.org/markets/tot_operation_schedule.html

That is all for today, take care